Consumer attitudes defy insurance gap

Geoff Rimmer

Most Australians rank their health as their number one priority, yet more than two-thirds of Australians are underinsured and almost 20 per cent believe insurance is a waste of money, according to a global survey conducted by AXA.

In an effort to bridge this protection gap, panellists at the Financial Planning Association’s (FPA) life risk discussion yesterday called for a more appropriate regulatory system to back advisers.

“In Australia we have a one-size-fits-all regulatory regime. I don’t believe that is appropriate. I don’t believe superannuation and risk are in the same game in that sense, the process may be the same, but the outcomes are very different,” CommInsure managing director Simon Swanson said at the FPA 2007 National Conference in Sydney.

This is a sentiment echoed by The Risk Store managing director Sue Laing, who believes advisers are not sufficiently armed to address the issue.

FPA life risk committee chairman, and chair of the panel discussion, Geoff Rimmer described the underinsurance issue in Australia as “chronic”, but not without a solution.

“I cannot see or understand how a person couldn’t receive good financial planning advice if life risk matters were addressed,” Rimmer said.

And the risk gap is a more significant issue than people may appreciate, according to Swanson.

“The real risk is longevity risk. There is a huge amount of underinsurance in the die-too-soon category and then we have a huge amount of underinsurance in the live-too-long category,” he said.

However, panellists were optimistic about a solution to bridging the protection gap, and suggested industry service the small-to-medium-enterprise market, increase incentives for clients who talk about insurance, use emotive stories to “soften the sell” and, most importantly, simplify the regulatory environment.

“There needs to be, from institutions like the FPA, a really strong voice at the table about simplifying the regulatory environment so that customers manage to get access to the relevant forms of advice and place a solution that suits their needs,” Swanson said.